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Factor54 raising money to grow

I stopped by the Costa Mesa garage that Factor54 calls home the other day and met company owners Todd Miller and Ted Wueste.

Factor54 is a small brand in the midst of raising $1 million to support its growth. So far, the duo has raised about 60 percent of their goal from industry investors and other high net worth people.

The beginning: Todd Miller, former professional surfer and long time Quiksilver employee, started Factor54 in 2002. He started with no money and ran on fumes for several years, he said. Todd mostly sold T-shirts to his friends for $10. The shirts were one color - he couldn't afford two.

He did know how to get the Factor54 name out there, though, having watched companies such as Quiksilver and Volcom develop over the years. Todd put stickers everywhere and influential friends supported Factor54, including Cordell Miller.

Enter Ted Wueste: Ted works at Sun Microsytems selling specialized technology to the intelligence market. He also surfs and lives in Newport Beach, and wanted to invest in a brand. When he began seeing Factor54 stickers everywhere, Ted eventually met up with Todd and they joined forces 1.5 years ago.

How it works: Todd is in charge of marketing, production and design. Ted is now 50 percent owner of the company. He handles sales and all the business end - in addition to doing his Sun job, and does not take a paycheck from Factor54. Ted's investment infused much needed working capital into the company and his business expertise helped build an infrastructure.

For the first four to six months after Ted came on board, the two organized the infrastructure, from starting an S Corp. to protecting their intellectual property globally. They also developed a sales strategy, which appears to be working. When Ted joined the company, one to two stores carried Factor54. Today, the brand is in 150 stores. In 2006, revenues were $16,000. In 2007, they planned $60,000 in revenue but reached close to $200,000. For 2008, they are aiming for $1 million.

Design/product strategy: The company hired a new designer, Frankie Kennedy, who they instructed to "just get nuts," Todd said. The goal is to be cool with skate and surf kids, not old guys, Todd said. "This stuff is so crazy I can't wear it." The company wants to introduce new categories when there is demand and keep quantities limited. Last summer, Factor54 made 300 board shorts, and sold every pair.

This summer, they made 1,100 and manufactured them overseas for the first time to boost profits. They took a similar approach with denim. Factor54's skate team asked for denim so they made a limited amount for the team. Now, store buyers are asking for them. "When the buyers start saying, ‘We need it,' we'll start making it," Todd said.

What's next: Ted and Todd plan to spend a lot of the money they raise on advertising and creating content to showcase their sponsored athletes to build the brand. They also plan to move out of the garage and into a warehouse. So far, they have turned down an international distribution opportunity to focus on building business in their backyard. Factor54 is in stores such as Surfside Sports, HSS, Spyder, ET, Becker and Frog House, Todd said, and they want build business in a 50-to-100 mile radius of their Costa Mesa home. "Big ticket retail is the goal in the long term, but not until we build a foundation," Ted said.

What Duke thinks: I checked in with Duke Edukas at Surfside Sports to see how Factor54 is doing. Here's what he had to say.

"Todd (Miller) introduced F54 a couple of years ago, much in the same way as Wooly, and Tucker Hall did with Volcom in the early '90's. We all started seeing these ‘F54' stickers all over the place, and quite frankly none of us quite knew what was up with it, let alone who was behind it. It was discovered soon after that it was Todd, who had recently left Quiksilver to start his own company.

Although we didn't carry it until about a year later, Todd was a much respected member of the Newport surfing community, and was the master at 54th Street, one of the most popular surf breaks in Newport, along with River Jetties and the Wedge. Todd hooked up with Ted who brought a certain business sense to the brand which Todd needed. Todd knew how to create the ‘buzz,' but needed someone like Ted to help the brand be successful.

"Through out the last year and a half in our store, F54 has done well. It has had its ups and downs with deliveries and such, but that's not uncommon for newer brands. Their t-shirts and hats have done well, but they have struggled in the cut-and-sew arena.

I think they are starting to figure out that part now, and only time will tell....Ted at F54 knows how to build a brand, and Todd knows how to drive the energy, but I think that they have lacked talented designers for their cut-and-sew in the past. With the reemergence of the Spring line, I think they are starting to figure that part out. ... The t-shirts are just as strong as they've been in the past, and the cut-and-sew is starting to check much better than it has in the past also."